The Worker Adjustment and Retraining Notification Act (WARN Act) was enacted in 1988 to allow workers to adjust to the prospective loss of employment from a plant closing or mass layoff. It requires employers to give affected employees 60 days' advance notice of such events. Employers that violate the WARN Act's notice requirements are liable to the affected workers for each day that notice is not provided up to 60 days. Often, however, plant closings and mass layoffs presage an employer's demise, so workers look to affiliates of the employer, such as a solvent parent or lender, to show that they acted as a "single employer" in making the termination decision and share liability for the WARN Act violation.

The U.S. Court of Appeals for the Third Circuit has adopted a five-factor balancing test to determine whether companies should be treated as a single employer. One of those factors—the existence of de facto control of the parent or affiliate over the subsidiar —seems to count more than the rest. (See our previous article, "Single-Employer Test Emphasizes De Facto Control Factor," published July 10, 2013, in Delaware Business Court Insider.) A recent decision, Hampton v. Navigation Capital Partners, C.A. No. 13-747-LPS (D. Del. Aug. 19, 2014), shows the importance of this factor. In Hampton, the court refused to dismiss a putative class action against a private equity firm for mass layoffs conducted by its subsidiaries in violation of the WARN Act. The court also addressed the proper venue for WARN Act claims.

Originally published in the Delaware Business Court Insider on September 10, 2014.